Secure Mortgage Licensing: Protecting You

1. Providing Service, Protecting You • SAFE/Senate Bill 36 • Secure and Fair Enforcement Mortgage Licensing Act of 2008 • WWW.DRE.CA.GOV • Licensing Questions – 877-373-4542

2. Department of Real Estate - DRE Larry Cannon Managing Deputy Commissioner Licensing Section Sylvia Yrigollen Managing Deputy Commissioner Mortgage Loan Broker Section

3. Providing Service, Protecting You SAFE ACT • SAFE was signed into law in June 2008 • Federal mandate for all states to license and regulate mortgage loan originators (MLOs) • Requires the registration of all MLOs on the Nationwide Mortgage Licensing System and Registry or NMLS • Resulted in the passage of SB 36 to bring California into compliance with Federal Law.

4. Providing Service, Protecting You TODAY’S DISCUSSION TOPICS • Definition of a Mortgage Loan Originator (MLO) • DRE’s Form RE 866 • NMLS License Endorsement Requirements • Filing a NMLS Application • Resource Information • FAQs

5. Providing Service, Protecting You Definition-MLO • MLO – Mortgage Loan Originator is a person: • Who takes Residential Mortgage Loan Applications; or • Who negotiates terms of a residential loan • And will be compensated for arranging the loan • Residential Loan • Secured by real property with a dwelling • Dwelling is a residential structure (1-4 units) • Independent loan processors/underwriters • Must comply with SAFE Act licensing requirements

6. Providing Service, Protecting You DRE’s Form RE 866 • Required for DRE Brokers, Corporations, or Salespersons who perform mortgage loan activities for residential properties • Filed via DRE web site by January 31, 2010, or within 30 days of commencing Residential Mortgage Loan activity • Over 42,500 licensees have filed RE 866 since • January 1, 2010 • E-mail addresses enable electronic notifications • to be sent

7. Providing Service, Protecting You MLO license endorsement requirements • A. SAFE Act Examination-Federal and State components • B. Pre-license education-20 hours • C. Submit fingerprint background check • D. Financial responsibility/Credit report • E. Application-filing on NMLS system

8. Providing Service, Protecting You A. Examination requirement • Register on the NMLS • Obtain unique identifier • Pass both exams (75%) • National Component (3 HRS) • State Component (2 HRS) • DRE/DOC state component are shared • Exam Resource Information • NMLS web site • Professional Requirements Tab • View exam content outlines

9. Providing Service, Protecting You B. Pre-license education-(PE) • 20 Hours of NMLS approved pre-license educational courses • 3 Hours of Ethics and Consumer Protection • 3 Hours Federal Law and Regulation • 2 Hours on Nontraditional Mortgages • 12 Hours of Elective Topics • Courses are not needed prior to completing NMLS examinations • Course providers approved through NMLS • NMLS – see Professional Requirements tab

10. Providing Service, Protecting You B. PE certification • Applies to any current DRE licensee • 20 hour education requirement will be “certified” as complete • MLO license endorsement application (MU 4) and fee must be filed by December 1, 2010 • Applicants will receive an email from the NMLS requesting a $15.00 processing fee • After fee payment, PE is considered complete for MLO application in any jurisdiction

11. Providing Service, Protecting You C. Fingerprint Check • Process begins with on-line application filing on NMLS • Appointments scheduled • Fee $39 • No MLO License endorsement if: • Felony conviction in past 7 years • Life time ban for felonies involving: • Fraud • Dishonesty • Breach of trust • Money laundering • MLO License previously revoked in another jurisdiction

12. Providing Service, Protecting You D. Financial Responsibility • Financial background questions on application forms • Credit Reports • Applicants will be required to authorize a credit report through NMLS between October 2010 and March 1, 2011 • DRE has adopted Regulations • Responses to questions on application • No FICO • CR to validate application responses • Liens and judgments for: • Fraud • Misrepresentation • Dishonest dealing • Mishandling of trust funds

13. Providing Service, Protecting You E. Application Filing-General Info • DRE Transition Year – 2010 • License endorsement must be issued by January 1, 2011 • Complete all requirements and file application by September 15, 2010 for endorsement to be issued by January 1, 2011 • Filing Guidelines • Applications and fees are filed through NMLS • Detailed filing instructions on DRE and NMLS web sites • Use DRE public record printout when completing applications • Licensees must keep DRE and NMLS records in sync • Only update filings based on DRE public record printout

14. Providing Service, Protecting You E. Required Applications • Application forms are filed on-line on the NMLS system • MU 4- salespersons, brokers, or broker-officers performing MLO activities • Includes brokers or designated corporations broker-officers who only supervise other MLO licensees • MU 1- licensed brokers who run their own company must file as a sole proprietor • MU 1-corporations which employ licensees performing MLO activates must file as a corporation • MU 2- is filed in conjunction with any MU 1 filing-this is a no fee filing which lists details on owners, officers, and control persons • MU 3-must be filed by any broker or corporation to establish a branch office location where MLO activities are performed

15. Providing Service, Protecting You E. Application Forms and Fees

16. Providing Service, Protecting You E. Other Important Information • For brokers or corporations • DBA’s (trade names), and branch office locations used for mortgage loan origination activities must be established on DRE record before adding to NMLS record • For salespersons or broker associates • If in the employ of a broker or corporation must have employing entity create a company relationship aftercompleting their MU 4 andestablish sponsorship with employing entity

17. Providing Service, Protecting You MLO License Endorsement • DRE license requirements and term remain intact • Endorsement certificate issued via DRE web site starting in Aug-Sept • Endorsement renewed annually (Nov-Dec 31st) starting in 2011 • Need 8 hours of CE for renewal • CE completed through NMLS approved provider • CE taken in the year endorsement is renewed

18. Providing Service, Protecting You Important Dates DECEMBER 1, 2010 - Final date to apply for license endorsement to receive pre-license education certification SEPTEMBER 15, 2010 -All NMLS requirements must be completed to receive an endorsement by January 1, 2011 OCTOBER 2010 – MARCH 1, 2011 – All MLOs must authorize a credit report through NMLS JANUARY 1, 2011 –Licenseesmust be registered and endorsed by DRE to conduct MLO activity in California RE 866 -Forms must be filed online within 30 days of performing MLO activities in California

19. Providing Service, Protecting You Resources • DRE • Web site- WWW.DRE.CA.GOV • Licensing Questions – 877-373-4542 • NMLS Resource Center • Licensees Tab: • Quick guides • Tutorials - Navigation Guides • Sample Forms – MU1, MU2, MU3, & MU4 • Policy Guidebook • NMLS • NMLS Call Center – 240-386-4444

20. Providing Service, Protecting You Frequently Asked Questions • ENDORSEMENTS/LICENSE REQUIRED WHEN: • Q. If I obtain the NMLS license identifier, will I be able to do loans without a DRE license? • No. You must also have a current DRE license and obtain a MLO License Endorsement. • Q. I am licensed as a real estate salesperson, but I have not been doing any activities at all. I pass out my business card because I am still hoping to do activities, including mortgage loans. Do I need to obtain a Mortgage Loan Originator License Endorsement? • Yes. • Q.I am a licensed real estate salesperson and I solicit customers for real estate activities. I am compensated to refer them to a loan officer for a residential mortgage loan. Do I need a Mortgage Loan Originator License Endorsement? • A. Yes

21. Providing Service, Protecting You Frequently Asked Questions ENDORSEMENTS/LICENSE REQUIRED WHEN: Q. I am a real estate broker who has hired brokers and salespersons to do mortgage loan origination for residential properties. Do I need to register? A. Yes. All licensed salespersons and brokers, including yourself, must file a Mortgage Loan Activity Notification Form RE 866 and obtain and maintain a Mortgage Loan Origination License Endorsement. Q. I am a licensed salesperson working for a broker who arranges loans. Do I need to report these activities to the DRE? A. Yes, if you also perform mortgage loan activities. Q. Under those circumstances do I need to obtain a Mortgage Loan Originator License Endorsement? A. Yes, if you negotiate or originate mortgage loans for residences of 1 to 4 units.

22. Providing Service, Protecting You Frequently Asked Questions • EDUCATION: • Q. Will any of my education completed to obtain my real estate license satisfy the pre-license requirement? • Individuals who are licensed by DRE will receive certification that the pre-license education requirement has been satisfied based on the education completed to obtain their DRE license. • To be eligible for this process, licensees must file Form MU 4 by December 1, 2010 • A $15.00 NMLS system fee will be assessed as part of this process. The fee request will be sent by email from the NMLS system. • DRE submits the names of licensees who file their Form MU 4 application to the NMLS system.

23. Providing Service, Protecting You Frequently Asked Questions • EDUCATION: • Can previous continuing education I completed for the renewal of my real estate license also be used to satisfy the 20-hour pre-license education requirement to obtain a MLO License Endorsement? • No. Only education which has been previously approved through the NMLS for the 20-hour pre-license requirement can be used. • Previously I was granted an exemption from continuing education for my real estate license based on my age and number of years being licensed. Does the exemption also apply to this requirement? • No. That exemption only applies to your four-year real estate license renewal requirement.

24. Providing Service, Protecting You Frequently Asked Questions CREDIT ISSUES: Q. Will DRE be using FICO scores in making a determination on whether a MLO license endorsement applicant has meet the SAFE Act financial responsibility requirement? A. No. Q. I have had a bankruptcy, foreclosure, or other credit issues which have had a negative effect on my credit score. Will I qualify for a mortgage loan originator endorsement? A. An applicant may be precluded from obtaining a mortgage loan originator license endorsement where his or her personal history includes any liens or judgments for fraud, misrepresentation, dishonest dealing, and/or mishandling of trust funds, or other liens, judgments, or financial or professional conditions that indicate a pattern of dishonesty on the part of the applicant. DRE has adopted Regulations which address this topic. http://www.dre.ca.gov/pdf_docs/2010_SB_36_SAFE_Act_Emergency_Text_Final.pdf

25. Providing Service, Protecting You Frequently Asked Questions RESTRICTIONS/PROHIBITIONS: Q. I have a restricted license and use it to perform mortgage loan origination activities. Do I need a Mortgage Loan Originator License Endorsement on my DRE license? A. Yes. Q. I have a felony conviction that was more than 7 years ago. Will I qualify for a Mortgage Loan Originator License Endorsement? A. The SAFE Act prohibits issuance of a MLO License Endorsement if you have ever been convicted of a felony involving an act of fraud, dishonesty, breach of trust, or money laundering. Also, the SAFE Act prohibits issuance of a MLO License Endorsement if you have been convicted of any felony (including those that do not involve fraud, dishonesty, breach of trust, or money laundering) within the last seven (7) years.

26. Providing Service, Protecting You Frequently Asked Questions • CONTRACT PROCESSOR/CONTRACT UNDERWRITER: • Q.I am an independent or contract processor or underwriter. Will I need to obtain a Mortgage Loan Originator License Endorsement? • A. Yes. • Q. Under those circumstances do I also need to obtain a real estate license? • Yes. Note: If you wish to maintain your independent status as a loan processor or underwriter, then a real estate broker license will be needed if you perform these activities for more than one broker. If you are performing processing or underwriting activities for one broker only, an endorsement is not required as long as your activities are supervised by your employing broker and are not otherwise performing acts that require a real estate license.

27. Providing Service, Protecting You THANK YOU • WWW.DRE.CA.GOV • Licensing Questions – 877-373-4542